Michael Blank talks to us today about 4 myths that scare people away from doing their first apartment deal and how to overcome these worries.
Michael breaks down some of the myths that people think are obstacles in doing their first apartment deal and explains how it can be possible for you.
Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Michael: Hey there. Welcome to the REI Classroom. My name is Michael Blank and I’ll be your instructor today. Today, I want to talk about the situation where you think that apartment building investing might the right way to go, but maybe not for you.
Mike: This REI Classroom real estate lesson is sponsored by FlipNerd Investor Coaching, your blueprint to investing success.
Michael: Okay. And the reason you might conclude that is probably for four reasons and they’re all myths. And I want to dispel them today, right now. So, again, there are four reasons you might dismiss multifamily investing even though your brain is telling you, “Hey, you know what, if I build up a portfolio of multifamily, I can actually retire in three to five years as I slowly build my portfolio,” and you’re totally right. But then you start thinking about it, “My gosh, how am I going to get there?” And you go, “I got to raise money. I got to find deals. How am I going to do that?” And you just say, “Ah, it might work well for others, but not for me.”
And there are four reasons you might think that and all four of them are myths. And I’m going to dispel them by trying to shift your mind so at least it reopens your mind to the possibility. That’s what I want to do today. So there are going to be a lot of external resources I’m going to point you to to take the next step after those ones. So make sure you’ve got a pen and paper ready and start writing.
So four reasons why you might dismiss multifamily investing as a strategy for you. One is you don’t have enough cash or credit. Number two is you don’t have the experience. Number three is you don’t know how to get started. And number four is it takes too long to be successful. And even one of them alone is overwhelming, can stop you in your tracks. But all four of them, most people can throw up their hands and go, “Nah, you know what? Maybe I’ll just keep looking for the single-family house strategy.” But let’s break down each of these perceived issues because once we look at them a little closer, there are actually misperceptions that can keep you in fear from not moving forward with the strategy.
So the truth is that apartment buildings are actually the best business in the world today for you to generate passive income and long-term wealth so that you can replace your income in the next three or five years. There’s nothing better in the world. So if that’s the case, and there are other people doing this thing, then why can’t you do it? Why don’t you at least consider? So I want to kind of shift your mind here.
Let’s talk about the first myth, which is, “I don’t have enough cash.” The most common objection I hear is, “You know, Michael it’s great but, you know, I’m going to have to raise $500,000, $250,000. I don’t have that kind of money.” And my answer always is, if you listen to me for a length time, is learn to raise money. No one uses their own money for apartment buildings. It’s all raised with investors.
So learn how to raise money. This is a very learnable skill. In fact, I write about it all the time. I can guarantee you one thing, if you get your first investor to invest with you for any amount of money at all, when you get that first success of an investor going, “Sure, I’ll give you $10,000,” you’ll experience the similar aha moment that I had back in 2009 when I first raised money for single-family houses and then apartment buildings after that.
Where really, the aha moment was like, “My gosh, let me get this straight, I can build this business as big as I want because I’m not limited by my own resources? I can build my business, the sky is the limit as long as I can find deals and raise money, I can keep adding units.” That was a huge aha moment for me because I was very limited by my own limited resources.
So we’re not going to go into details of raising money. I have plenty of videos and blog posts. If you want to know more about that, the best way to do it is to go to my website themichaelblank.com and scroll down to “What do you need help with?” And click on “raising money.” That brings up all the blog articles, videos and podcasts I’ve done related to raising money. And I will address most of your questions there. If not, you can follow up with that. So that’s myth number one, “I don’t have money.”
Myth number two is, “I don’t have the experience.” This is a real problem, but I found that people are successful even without experience. And it’s for several reasons. One is they have a certain level of education that allows them to use the right words, which then also raises their confidence. So as they present themselves and speak, and normally what happens, when you start speaking to a broker and you don’t use the right language, they immediately classify you as a newbie and they treat you like that. In fact, most of the time, they don’t even return your call, they won’t email you, they won’t return your call and it’s a real problem.
So the way you fix that is by having just a little bit of education. So using the right words and using maybe the right scripts. So when you do call the broker, you proactively address their objections using the right language, you’re referencing your team, for example, that’s better, you’re referencing the kind of deals you’re looking for and language you understand. So there are certain scripts you can use, for example, that will limit the amount of questions you get related to your experience or your ability to perform and your cash.
One of those things is kind of a broker script I put together. Again, it’s on themichaelblank.com and just search for “newbie.” The article is called, “How to Not Sound Like a Multifamily Newbie.” So just go to themichaelblank.com and search for newbie and that should be one of the top articles that come up. Just look at that thing and see if that makes any sense to you.
So what I’m trying to say, again, is there are things you can do proactively that makes you appear more experienced than you really are, therefore avoiding a lot of the qualifying questions that you get. So you don’t actually need experience. There are plenty of people that are doing deals without experience. And you don’t even need single-family house experience.
So don’t think that you’re doing a one or two or whatever single-family houses and you get experience. I flipped about 34 houses and I got hardly any credit for house flipping. It’s like a toilet, like you might as well have been doing some kind of restaurant business or something. I got very little, if any, credit for flipping houses. And it was a no stepping stone whatsoever. So don’t go down that track. If you want to go after multifamily, go after multifamily.
All right. Myth number three is, “I don’t know how to get started.” I get this. And it’s kind of an overwhelming. And if I were to boil it down to just one thing and how to get started is to learn how to analyze deals. If you analyze deals, several things happen. One is you start developing the appropriate language, cash and cash return, cap rate. They mean something to you. You know how to use them. Now you learn how to underwrite deals and that in turn raises your confidence level. And once your confidence level goes up, you get treated differently by brokers, by potential investors. They return your phone calls. They are eager to invest with you.
So everything hinges, really, on your ability to analyze deals, which is why I tell new people to learn to analyze deals first and everything else comes from that. Your comfort zone, by the way, expands also. And again, I have a resource for you. Also, I have a free eBook that describes how to analyze deals. I call it, “The Ten Minute Offer.” And the eBook is at themichaelblank.com/analyze and it’s called “The Ten Minute Offer: How to Analyze and Make Offers in Apartment Building Deals in Ten Minutes.” So now you have no more excuse to say you don’t know how to get started because that’s where you get started.
Number four, “It takes too long to be successful.” Now, granted, if you’re talking about a retirement, plan three to five years, if you think it that way, it’s not a long time. It’s not a long time period. “Hey, I want to retire in five years,” and maybe you have 20 years left before you’re officially retired. So it’s actually pretty first. That’s great. On the other hand, it’s a really long time frame and not a lot of people can wait five years to get a result. And it’s just simply too long. You really want something faster.
If you are one of those people, and most are like that, you need some kind of success, then I have a strategy for you. And that is then to buy a duplex. Now duplexes aren’t officially multifamily. They’re actually considered residential. But they will get you in the game. And there are plenty investors that I’ve even had on the podcast that started with a duplex. And I will try to talk you out of it because bigger is, in fact, better with multifamily. So I’ll try to talk you out of it. I will have you go through some exercises to expand your comfort zone so you can start thinking around a 15 or 20-unit probably within 21 days.
But if that fails and you need results quicker, before you give up and throw the towel, do a duplex. I actually have a video on this as well. The way you find is on flipnerd.com. Go to flipnerd.com where I host REI Classroom videos like this one here. And at the very top, click on “shows” and “REI Classroom” and then type in “duplex” in the top and then look for my show, “How to Buy Your First Investment Duplex in the Next 90 Days.” So that’s kind of a strategy. If you’re really, really impatient and you really want something now or in 90 days, that’s the way to go.
So, in summary, then, you can do your first apartment building deal. There’s no more excuse and really is the best real estate strategy in the world. And if you think about these four myths, you don’t really need your own cash to get started. You don’t need to have experience. You can do something in the next 90 days. And you know how to get started. There’s really no more excuse.
And again, this video is too short to give you details on the stuff, but my goal really is to open your eyes and shift your mind. Because you might be held back by these myths that aren’t really true and you think about it and you break it down that way, you’re like, “Man, I have been kind of misguided, maybe ignorant, miseducated.” There actually is a way. And you can then start on that road to multifamily investing, which will then get you to where you want to go within three to five years. All right. So hopefully, you found that interesting and maybe it opened your eyes to the possibilities and I’ll catch you on the next episode.
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